The Weinstein affair: a catalyst for greater investor scrutiny

August 20, 2020

The allegations against Harvey Weinstein triggered the global #MeToo movement. The magnitude of the incident showed investors the importance of protecting their investments against the financial and reputational harm caused by the sexual misconduct of the target’s management.


The “Weinstein clause” was born.

Here is a sample clause:

(e) Since the Lookback Date, to the Knowledge of the Companies, no allegations of sexual harassment have been made to the Companies or their respective Subsidiaries against any employee of the Companies and their respective Subsidiaries who is employed as a senior level executive, officer or supervisor of the Companies or their respective Subsidiaries. [Source: SEC public filings.]


Before the #MeToo movement, around 12% of the M&A deals that MARTINI analysed contained contractual protections against sexual misconduct. It is often included as part of a broader provision addressing harassment at the workplace and employment practices.

This figure jumped to 19% in the aftermath of the #MeToo movement.

Below is a sample employment practice reps and warranties:

(b) Seller, and as of Closing Date and to Seller’s Knowledge the Company, is, and within the past three (3) years has been, in compliance in all material respects with all applicable Laws pertaining to employment and employment practices, including all Laws relating to labor relations, labor standards, fair employment practices, employment discrimination, pay equity, French language, harassment, reasonable accommodation, termination of employees, immigration, privacy, health and safety, workers’ compensation and unemployment insurance. [Source: SEC public filings.]

Overall, we have seen an annual increase of 3.6% in the past five years.

Preventing sexual harassment at workplace is but only one component of the ESG (Environmental, Social, and Governance) framework.

Given the increasing emphasis on ESG issues in the investment sector, MARTINI expects this trend to continue. Over the next decade, we are confident that anti-harassment reps and warranties will become the norm in M&A deals.

MARTINI analysed over 1,000 multi-jurisdictional M&A deals in the last 15 years. Subscribe to our monthly Olive blog, so that you stay ahead of the curve!

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For the legal eagles, here are some drafting examples:

“Weinstein Clauses”:

Sample 1:

     (j) To the Company’s Knowledge, since January 1, 2016, (i) no allegations of sexual harassment or related misconduct have been made against any current or former director, officer or employee of the Company or any of its Subsidiaries and (ii) neither the Company nor any of its Subsidiaries are a party to any settlement agreements related to allegations of sexual harassment or misconduct by any current or former director, officer or employee.

Sample 2:

     (b) Since December 31, 2015, (i) no allegations of sexual harassment have been made against any current director, officer or employee of the Company or any of its Subsidiaries at or above the senior vice president or equivalent level, and (ii) neither the Company nor any of the Subsidiaries have entered into any settlement agreements related to allegations of sexual harassment or misconduct by any current or former director, officer or employee of the Company or any of its Subsidiaries at or above the vice president or equivalent level.

Employment practices reps and warranties:

Sample 1:

     (d) Except as set forth in Section 3.11(d) of the Disclosure Schedule, (i) each of the Transferred Companies is, and at all times since March 31, 2010 has been, in compliance in all material respects with all applicable Laws respecting employment, including discrimination or harassment in employment, terms and conditions of employment, termination of employment, wages, overtime classification, hours, occupational safety and health, family and medical leave, workers compensation, employee whistle-blowing, immigration, employee privacy, employment practices and classification of employees, consultants and independent contractors, material laws of each foreign jurisdiction related to employment where employees, consultants and independent contractors provide services and (ii) as of the date of this Agreement, no unfair labor practice or labor charge or complaint is pending or, to the Knowledge of the Company, threatened with respect to any of the Transferred Companies before the National Labor Relations Board, the Equal Employment Opportunity Commission or any other Governmental Entity or governing body in any jurisdiction.

Sample 2:

     (a) Except as set forth on Section 3.18(c) of the Sellers Disclosure Schedules, the Sellers and the Company Group are and, since January 1, 2013, have been, in compliance with all applicable Laws regarding employment and employment practices in respect of Business Employees, including any and all such Laws relating to terms and conditions of employment, wages and hours, plant closings and mass layoffs, occupational safety and health, collection and payment of withholding and/or social security Taxes and any similar Tax, labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence and unemployment insurance and workers’ compensation, and are not engaged, nor have they engaged, in any unfair labor practices in respect of Business Employees, except where the failure to be so in compliance with such applicable Laws regarding employment and employment practices does not constitute a Company Material Adverse Effect.

Sample 3:

     (d) Except where the failure to do so, individually or in the aggregate, would not reasonably be expected to be material and adverse to the Neptune Entities, taken as a whole, each of the Group Entities, since January 1, 2016, has, to the Knowledge of the Sellers, complied with all applicable Laws pertaining to the employment or termination of employment of their respective Business Employees, including all such Laws relating to employment practices and standards, labor relations, equal employment opportunities, employment equity, pay equity, privacy, Charter of the French Language (Quebec), occupational health and safety, worker’s compensation, harassment, employment insurance, safety and accessibility for people with disabilities requirements, human rights legislation, wages and hours of work and, to the Knowledge of the Sellers, there are no outstanding claims, complaints, charges, proceedings or investigations under any such Laws.

Flora Suen-Krujatz

A lawyer turned entrepreneur. Flora enjoys applying her legal skills with a brand new perspective. Formerly an M&A lawyer at Linklaters London, Hong Kong & Shanghai.